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Guest Editorial: CA Legislators have opportunity to deliver cost savings through oversight of health care middlemen

Access to affordable health care and innovative new treatments has been an ongoing concern for Orange County residents and their families, and the challenges associated with confronting the COVID-19 pandemic brought the gravity of the issue into increased focus. California patients need lawmakers to find sustainable solutions to rising health care costs to help all residents, and particularly vulnerable communities. Through commonsense regulation of little known health care middlemen, policymakers have the opportunity to do just that.

Although you may not have heard of them, pharmacy benefit managers (PBMs) play a significant role in determining what medications you’re allowed to have and what you will pay for them at the pharmacy counter. Health insurance companies pay pharmacy benefit managers to negotiate drug costs with manufacturers, and the outcome of those negotiations can also determine what medications you have access to through your insurance coverage. Although PBMs were originally intended to reduce prescription drug costs, a growing body of evidence suggests that PBMs are actually a leading contributor to the rising cost of health care.

When PBMs negotiate with drug manufacturers, they receive price reductions in the form of rebates. Unfortunately, because PBMs operate with little oversight and transparency, not much is known about what happens to those rebates, including how much the PBM keeps for itself, how much it passes back to the health insurer, and what the insurer does with those savings. What has become increasingly clear is that the rebates and cost savings are not being passed along to California consumers.

In its recent report on drug price transparency, the California Department of Managed Health Care (DMHC) found that drug manufacturers gave more than $1 billion in rebates in 2018 – an increase of 14.8 percent – and yet insurance premiums went up by 6.2 percent. In other words, California consumers aren’t seeing any savings. The Department identified health plan profits as the single biggest driver in the increase in the cost of health insurance premiums for consumers.

The legislature has previously taken positive initial steps to regulate PBM business practices; however, more must be done to ensure California patients – particularly those living with rare and chronic conditions – continue to have affordable access to the most innovative treatments. The availability of new ‘biosimilar’ drugs is one reason why.

Biosimilars are low-cost versions of biologic drugs – complex and expensive drugs that are manufactured from living cells. A biosimilar is a nearly identical copy of its biologic drug equivalent – and they have potential to increase access to life-saving medications for a range of conditions, including cancer, arthritis, MS, lupus and others.

However, as PBMs determine what drugs you will have access to, they currently have little incentive to increase access to these more affordable drugs.The higher the cost of the drug, the bigger the rebate for the PBM. If PBMs do not have to pass along rebate savings to consumers, they might not allow patients to even access cheaper biosimilars, which would unnecessarily keep the cost of care high.

Among the many lessons of COVID-19 is the importance of timely access to affordable treatment. As a patient advocate representing many living with neuropathic pain, I urge legislators to take additional steps to ensure that patients see cost savings at the pharmacy counter by requiring PBMs to pass down manufacturer rebates. Delaying access to care and allowing costs to remain artificially high exacerbates the challenges facing patients and their families.

Chris Buchanan is on the board of the Neuropathy Action Foundation, an Orange County-based patient advocacy organization.